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Suppose that Brown-Murphies’ common shares sell for $17.50 per share, that the firm is expected to set their next annual dividend at $0.49 per share, and that all future dividends are expected to grow by 6 percent per year, indefinitely. Assume Brown-Murphies faces a flotation cost of 11 percent on new equity issues. What will be the flotation-adjusted cost of equity? (Round your answer to 2 decimal places.)
Firm S is considering adding a robotic device to its production line. The device base price is $1,038,000.00, and it would cost another $21,500.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates a..
A loan is to be repaid in level installments payable at the end of each year for 7 years. The effective annual interest rate on the loan is 4%. After the 4th payment the principal remaining is $5000. Find the amount of the loan.
Today, you invest a lump sum amount in an equity fund that provides an 10% annual return. You would like to have $11,700 in 6 years to help with a down payment for a home. How much do you need to deposit today to reach your $11,700 goal?
Consider a one year American call option on 100 ounces of gold with a strike of $1200 per ounce. The spot price per ounce of gold is $1210 and the annual financing rate is 4% on a continuously compounded basis. How would you hedge a short position in..
Mess man Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equi..
Nally, Inc., is considering a project that will result in initial aftertax cash savings of $6.1 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. Calculate the WACC. What is the maximum co..
Consider an investor who, on January 1, 2016, purchases a TIPS bond with an original principal of $111,000, an 10 percent annual (or 5 percent semiannual) coupon rate, and 15 years to maturity. If the semiannual inflation rate during the first six mo..
ABC College is considering an investment in one of two common stocks to add to the employees' retirement portfolios. Given the following information, which investment is better, based upon the risk (as measured by the standard deviation) and return o..
Determine the annual financing cost, before considering cost savings and bad-debt losses. Determine the annual financing cost, after considering cost savings and bad-debt losses.
What is the price of a 5-year, 7.5% coupon rate, $1000 face value bond that pays interest quarterly if the yield to maturity on similar bonds is 11.9%?
Calculating Present Values. Suppose you are still committed to owning a $150,000 Ferrari. If you believe your mutual fund can achieve a 10.25 percent annual rate of return, and you want to buy the car in 10 years on the day you turn 30, how much must..
What is the price today of a $1,000 bond with a coupon rate of 10 percent and a current yield of 8 percent over 3 years? (round to the nearest whole dollar)
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